Level 3 Communications Inc. (LVLT -5.83%) agreed to buy business Ethernet provider TW Telecom for about $5.7 billion in cash and stock, a deal that would expand the metropolitan footprint of the long-haul Internet carrier.

The deal values TW Telecom at $40.86 a share, a 12% premium to Friday’s close. Shareholders would receive $10 in cash and 0.7 share of Level 3 for each share of TW Telecom.

TW Telecom shares rose in early trading to approach the offer price.

Level 3 Chief Executive Jeff Storey pointed to TW Telecom’s extensive local operations, which he said would complement Level 3’s global assets. Level 3, an operator of Internet networks that help companies send videos or other content more quickly, has network and data centers in more than 60 countries, along with global subsea networks.

A deal between the two companies had long been speculated in the industry and was thought to be more feasible now due to Level 3’s improved financial condition.

Analysts at Wells Fargo Securities called TW Telecom a “crown jewel” based on its metro fiber concentration and said the price it fetched illustrates the increasing demand for this fiber exposure.

The deal also marks Level 3’s first major acquisition under Mr. Storey, who became CEO in April 2013 and initially focused on improving the bottom line and free cash flow.

Originally a joint venture of Time Warner Inc. TWX +0.04% and U.S. West started in 1993, TW Telecom made its public trading debut in 1999 as Time Warner Telecom Inc.

Last year, activist investor Keith Meister of Corvex Management LP, a protégé of Carl Icahn, revealed a big stake in TW Telecom and said he thought the company was a likely takeover target, owing to its strength in the data space—a key growth area as customers increase their use of mobile devices.

The company last month reported improved quarterly revenue, helped by a big increase in data and Internet revenue, but profits declined on higher expenses. Its market value at the end of the first quarter was $4.4 billion.

For its part, Level 3 has used a series of deals in recent years to acquire several of its rivals but has been weighed down by debt, which stood at $8.3 billion at the end of 2013.

It survived the telecom shakeout without seeking bankruptcy protection. But its market value slipped to $9.2 billion at the end of the first quarter from $42 billion in March 2000 as the industry worked off the excess capacity amassed during the dot-com boom.

Level 3 gradually has pared its losses since its 2011 acquisition of fellow long-haul Internet service provider Global Crossing burdened it with higher costs and slower-than-expected revenue growth. The company in April raised its outlook for the year as its belt-tightening paid off and its core network-services revenue increased. Its shares have more than doubled over the past year.

The companies valued Monday’s deal at about $7.3 billion, which includes the assumption of about $1.6 billion in debt, and said TW Telecom shareholders would own about 27% of the combined company on a diluted basis.

The deal is subject to approval from the U.S. Federal Communications Commission and state agencies, along with the shareholders of both companies. STT Crossing Ltd.—a unit of Singapore Technologies Telemedia Pte Ltd., which owns about 23% of Level 3’s outstanding stock—has already entered a voting agreement with the companies. STT had been a major holder of Global Crossing.

For the 12 months ended March 31, Level 3 and TW Telcom said their combined revenue was $7.9 billion and earnings were $2.2 billion, adjusted for some items. The deal is expected to create annual synergies of about $240 million.

The companies said their geographic proximity should help ease their integration as both are based in Colorado, with Level 3 in Broomfield and TW Telecom in Littleton.

For the past 35+ years, computers, advanced technology and solving problems with this new technology have been his business. In 1978, he graduated from Appalachian State University in Boone, NC with the first graduating class in the 16 North Carolina Universities with an Information Systems degree from the College of Business. For the last 14 years Nicky has served as the visionary leader and CEO of CAROLINANET.COM, a web hosting and server colocation data center and since 2004 the CEO of Carolina Digital Phone offering hosted telephone services and SIP Trunking. Read more at his LinkedIN page http://www.linkedin.com/in/nickysmith